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What's Haunting America's Toy Industry?

This week, thousands of toy retailers, manufactures, and media professionals will descend upon New York for the annual toy fair. But as the industry gathers for what is one of the most anticipated events of the year, it is haunted by the ghost of holidays past.

It’s not the dismal holiday shopping results of 2009 or even 2008 spooking the 20,000 attendees expected at Toy Fair 2010. It’s the holiday season of 2007. That was before the economy officially tanked, but it was also the season when lead paint and other toxic substances were discovered in toys imported from China.

The storm of media attention over the recalls of popular toys like Thomas the Tank and Polly Pocket dolls attracted the attention of Congress. That led to passage of a well-intended but flawed piece of legislation called the Consumer Product Safety Improvement Act (CPSIA).

Passed by a bipartisan majority in Congress, the CPSIA went into effect just a year ago. And over the past year it has proved to be one of the great white elephants of regulatory legislation. Even by Washington standards it is confusing and complicated, leaving the Consumer Product Safety Commission (CPSC) struggling to interpret and enforce it.

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The law’s prohibitions on what materials can be used in toys and other children’s products are so broad that it has banned clearly safe materials and forced their replacement with less studied substitutes, ironically putting children at risk.

Consider the CPSIA’s treatment of chemical compounds known as phthalates. These substances have been widely and safely used in children's toys for 50 years. Phthalates are used as “plasticizers” or softening agents in plastic toys. They are essentially what make your kid’s rubber duckies squeezable. Extensive assessments by federal agencies have found that their use in kids’ products presents no danger or risk to children. In fact, scientific panels at both the CPSC and National Toxicology Program have found the phthalates used in consumer products safe for intended uses.

Yet in response to some well-propagated and unfounded health scares, Congress overreacted and included restrictions on phthalates in the CPSIA. As a result, manufacturers are forced to substitute chemicals, which are still uncharted territory in terms of possible effects on children's health.

On the economic front, CPSIA has burdened retailers with inefficient and expensive product testing requirements that forced some small businesses to close their doors and others to eliminate jobs. At a time when the federal government should be doing everything possible to preserve jobs and stimulate economic growth, the CPSIA is doing the exact opposite. In effect, it is essentially anti-stimulus legislation.

But the biggest disappointment of the CPSIA is its ineffectiveness in providing any additional safety for children and confidence for parents. The complexity of the law has confused regulators and produced anxiety and doubt among the consumers it was supposed to reassure.

This is the one-year anniversary of implementation of the CPSIA - in February of 2009 the CPSIA placed a temporary prohibition on phthalates, causing redundant testing costs and other burdens on small businesses, resulting in unintended consequences.

The good news is that Congress is beginning to acknowledge that the CPSIA has done more harm than good. Congress has reached out to the CPSC, asking them for recommendations on how this law could be fixed.

The CPSC shouldn’t lack for recommendations, not after living with the smothering reality of this legislation for the last 12 months. Here we are one year later and it appears our children no less safe and our businesses no better off. If we really want to improve the well-being of our families, it is time some serious action was taken to clarify this law.